Natural resource dependence and economic growth: A TOPSIS/DEA analysis of innovation efficiency

Abstract

Countries with a low level of innovation are prone to challenges of resource-based development such poor economic growth, weak institutions and corruption, political instability, and generally poor living conditions for the populace while the elite leave in affluence. This paper examines how promotion of innovation in natural resource-rich economies can potentially insulate them from the resource curse. It uses Data Envelopment Analysis (DEA) based on Technique for Order of Preference by Similarity to Ideal Solution (TOPSIS) in analyzing the innovative capabilities and readiness of natural resource-rich economies so that they don't fall into the trouble zone of the resources. The study investigates innovation efficiency challenges as a new perspective to the resource curse literature and notes that countries that do not have high innovation performances present low potential to improve their innovation efficiency and development. It concludes that high economic dependency on natural resources' exports or poor political stability could lead countries to fall into this trouble zone, especially the countries that are mostly dependent on oil exports if they do not innovate.